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CNPC gain foothold in Middle East

30th April 2014

China National Petroleum Corporation (CNPC) has signed a contract to produce and export oil from Abu Dhabi.

CNPC gain foothold in Middle East
The joint venture, called the Al Yasat Company for Petroleum Operations, will give the Chinese energy giant a 40 per cent stake, whilst ADNOC will hold the 60 per cent controlling stake.

Under the deal, passed by the president of the United Arab Emirates (UAE), CNPC will develop onshore and offshore fields in Abu Dhabi and take a share of any oil produced, UAE state news agency WAM said.

"It's a typical concession, meaning you pay the royalty and then you get the JV (joint venture) share of production," a senior source at CNPC told Reuters.

The joint venture, called the Al Yasat Company for Petroleum Operations, will give the Chinese energy giant a 40 per cent stake, whilst ADNOC will hold the 60 per cent controlling stake.

The new concession comes after ADNOC and CNPC signed a strategic partnership in January 2012 to work on upstream projects in the UAE.

The joint venture will drill for crude and build the processing and transport infrastructure needed to export it, WAM reported.

This may come as an upset to western oil and gas giants Exxon Mobil, Royal Dutch Shell, Total and BP who have been the dominant foreign players in the UAE concession system for decades.

State-run CNPC has expanded over the past decade to over 30 countries around the globe to help secure supplies of the oil and gas that China needs to sustain its economic growth.

The CNPC agreement has no direct impact on any of the decades-old concessions. But it is another sign that the government is seeking to cement political and commercial ties with its biggest customers in Asia.

"It really shows that Abu Dhabi is clearly pivoting towards Asia," Valerie Marcel, associate fellow of energy at the Royal Institute of International Affairs in London, said to Reuters

"It doesn't mean that the old partners won't get anything, but it does point once more to the fact that their gaze is turned eastwards."

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